Analysis of Thursday's trades:
30M chart of GBP/USD
Being in the sideways trend for two days, GBP/USD traded slightly above 1.3049 and unsuccessfully tested the mark on Thursday. Generally speaking, the pair tried to break through the barrier three times in two days. Yet, it failed every time. Above all else, it cannot enter a bullish correction, indicating that there are no buyers in the market right now, just as there are no reasons for buying GBP. Thursday's macroeconomic calendar was empty. Although some geopolitical news came in from time to time, the currency pair remained flat. Therefore, we can assume that it had no effect on the market. Nevertheless, the general fundamental background remains negative for both the euro and the pound, and positive for the greenback. We can suggest that the dollar will continue to extend gains. Should the Ukrainian conflict escalate in the coming days, it will trigger a fall in both currency pairs.
5M chart of GBP/USD
In the M5 time frame, the quote bounced from the 1.3102 high that formed a day earlier. The pair now trades in the narrow sideways channel of 1.3049-1.3102. It is still unclear when it will leave it. Therefore, the pair may well remain in the channel on Friday. The price was generally flat on Thursday but was moving down slowly in the interval between the European session and the North American one, which can be counted as a weak trend movement. One way or another, the price bounced from the 1.3102 level and made a single sell signal. By the middle of the North American session, the quote fell to 1.3049 and tested the mark. It was the right moment for profit taking. A rebound from 1.3049 could be interpreted as a buy signal. The price then rose by 20 pips, which was enough to set a stop-loss order at the breakeven point, and returned to 1.3049, making it impossible to earn some profit from that trade.
Trading plan for Friday:
In the 30M time frame, there has been no emerging trend. Notably, the current movement can be called neither a flat nor a trend. Therefore, we could hardly foresee where the pair can go further. If the quote breaks through the strong level of 1.3049, the downtrend may resume. On Friday, the target levels in the 5M time frame are seen at 1.3000, 1.3042-1.3049, 1.3102, 1.3156, and 1.3210. A stop-loss order should be set at the breakeven point as soon as the price passes 20 pips in the right direction after a trade has been opened. No macro events are expected either in the UK and the US on Friday. Therefore, geopolitical and technical factors are likely to be the only ones affecting the pair during the day. So, do not forget to track technical signals.
Basic principles of the trading system:
1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.
2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to the Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.
3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading.
4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.
5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.
6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.
How to interpret charts:
Support and resistance levels can serve as targets when buying or selling. You can place Take Profit near them.
Red lines are channels or trend lines that display the current trend and show which direction is better to trade.
MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines.
Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginner traders should remember that every trade cannot be profitable. The development of a reliable strategy and money management is the key to success in long-term trading.
